A new lease on Nevada oil and gas?

Thomas Schmidt, Bureau of Land Management geologist for the Tuscarora field office, shows a sample of the first production in about 2015 from an oil well near Jiggs.

SUZANNE FEATHERSTON
sfeatherston@elkodaily.com

Only ruins of the Catlin Shale Products Co. remain at the site of Elko County’s 1920s-era experimental oil-from-shale operation, which sparked interest in oil production in northeastern Nevada that continues today.

SUZANNE FEATHERSTON
sfeatherston@elkodaily.com

Shale rocks in the Elko Formation, such as these sheets at the former Catlin Shale Products Co. workings of the 1920s south of Elko, were once at the bottom of ancient lakes. Some specimens contain enough oil that the rock can be set on fire.Shale rocks in the Elko Formation, such as these sheets at the former Catlin Shale Products Co. workings of the 1920s south of Elko, were once at the bottom of ancient lakes. Some specimens contain enough oil that the rock can be set on fire.

A yellow-brown oil sample from the Elko Formation near Jiggs congeals in a quart-sized canning jar in the office of Thomas Schmidt, Bureau of Land Management geologist for the Tuscarora field office.

The substance emerged from Nevada oil shale deep in the ground at about 153 degrees in 2015 looking like a beer — yellow and frothy. Now cool and turning butterscotch brown, the oil looks more like petroleum jelly and smells about the same, with a tinge of acrid asphalt.

“It’s more like shoe polish,” Schmidt said. He unscrewed the lid and blended a touch onto his knuckles.

The product he saved came from Huntington Valley near Jiggs when a Houston-based oil company extracted 3,831 barrels of oil in 2014 and 2015, according to the Nevada Division of Minerals. Noble Energy elected to discontinue exploration in northeastern Nevada after assessing the commercial viability in the commodity environment, the company states in its 2015 annual report. The wells were plugged and abandoned in early 2017 as the leases on public land expired, Schmidt explained.

Since Noble Energy’s exploration, no new entity has developed oil operations in Nevada, although there has been exploration and a handful of companies have been producing oil in some of the state’s 10 oilfields, primarily in Nye county, for years, according to the Nevada Division of Minerals and Nevada Bureau of Mines and Geology.

Oil has been produced in Nevada since 1954, making more than 53 million barrels by 2016, the division reports, and exploration dates to 1908; five producers operated in the state in 2017. For comparison, oil production in Texas totaled more than 73 million barrels in November 2016, according to the Railroad Commission of Texas.

“Most of the oil in Nevada that has been produced in Nevada has been heavy asphaltic crude,” said Rich Perry, administrator of the Nevada Division of Minerals, who described Nevada as a “frontier state” when it comes to oil.

Interest

A recent expression of interest, however, for an oil and gas lease on public land near Elko has the community wondering how oil production would affect the Ruby Mountains.

As the manager of subsurface minerals in public land, the BLM has the authority to lease land for oil and gas once a quarter. Companies or individuals can request that parcels of land be made available for lease through an expression of interest.

This happened in April 2017 when the state BLM office received an email request from an individual who is identified in documents as Ethan Murray of Murray Land Service. He requested that about 54,000 acres in Elko and White Pine counties — south of Lamoille Creek and north of Sherman Creek on the west side of the Ruby Mountains — be made available for lease.

Murray did not respond to a request for an interview.

“Someone sent in an expression of interest, an EOI, to the Department of Interior, listing these sections and townships. Anybody can do that,” said Perry, who explained that the process does not require any type of fee, like staking a mining claim does. “That triggers a process by which they have to look at and do an environmental assessment on, ‘Should this go into a BLM competitive quarterly lease?’”

Because the land is under the jurisdiction of the National Forest Service, the state BLM office must receive an environmental assessment from the Forest Service regarding the land in Elko County. The analysis seeks to determine if the lands can be made available administratively, and what stipulations would be included to protect surface resources.

“We are the surface managers,” said Jenna Padilla, northeast zone geologist for the Humboldt-Toiyabe National Forest.

Surface resources include wildlife such as sage-grouse, trees, recreation, cultural resources, watersheds, rare plants, steep slopes and more. Stipulations could range from “no” to the lease altogether to imposing restrictions such as no surface occupancy, controlled surface use and timing limitations.

“Right now, we are doing the environmental analysis just for the leasing alone,” Padilla said. “There isn’t any ground disturbance that would be authorized through this environmental assessment.”

Completing an environmental analysis included a public scoping comment period that ended Nov. 2 and garnered approximately 8,200 public comments. Input came from individuals, Western Shoshone tribes, and organizations, such as the Center for Biological Diversity and sportspeople groups, including Trout Unlimited.

Groups that have submitted written comments in opposition to the proposal are the Theodore Roosevelt Conservation Partnership, Backcountry Hunters and Anglers, Nevada Muleys, and the Nevada Wildlife Coalition.

“There were comments received in support, but it was a very small number compared to all the comments in opposition,” Padilla said, explaining that the submissions included a combination of individual letters and form letters. “Even in the unique letters, there was a strong voice of opposition.”

Forest Service staff members, including Padilla and Clarke Douglas, planner for the Humboldt-Toiyabe National Forest, are reviewing the comments, which will be considered in the overall analysis. The team expects the analysis to be completed sometime in early spring, Padilla estimated, when a draft decision notice will be published. After a public objection period and further review, the Forest Service ranger will make a determination that the state BLM would use to decide whether to put the land up for lease.

If the land is leased and a company wants to drill, the interested party must go through another environmental analysis process.

The last time the BLM requested that the Forest Service complete an analysis was in 2006, Padilla said. An analysis was completed, but no action was taken.

If the parcels were on BLM land only and not Forest Service land, then the BLM would handle the analysis using a similar process.

Geology

The idea of oil in the Ruby Mountains has Perry scratching his head, as the state’s geology makes the likelihood of finding oil on the Rubies practically nil.

“I have no idea why this individual nominated these pieces of ground in the Rubies,” Perry said. “I know of no targets for oil in the Rubies. It’s a metamorphic ore complex. There’s no sedimentary rock that would contain oil.”

Oil and gas occur because organics that died in oceans thermally matured and were deposited, Perry explained. Those oil deposits — in conventional or unconventional form — typically fall in basins in reservoirs that are structurally controlled.

Conventionally, oil and gas flows freely through permeable rock, such as some sedimentary rocks, and is under pressure. Drilling pierces or intersects the oil or gas-bearing layer then pressure in the formation pushes the oil or gas up a pipe to be pumped out. Most oil production in Nevada has been conventional, and the state never has had commercial natural gas production, Perry said.

In an unconventional target, oil or gas exists in low-permeability shales but cannot move freely. Extraction requires a mechanism, such as hydraulic fracturing, to create permeability in the rock. “Fracking” adds components such fluid and sand to the ground to create the right conditions to mobilize the oil.

The Noble Energy oil sample, light high paraffin crude oil from Huntington Valley in Elko County, came from a well that was hydraulically fractured under policies that Perry called the most stringent in the country. Five wells have been hydraulically fractured in Nevada: three in Elko County and one each in Nye and Eureka counties, according to the Nevada Division of Minerals.

Another geological factor works against oil deposits in the state: geothermal activity.

“Nevada doesn’t have a lot of oil targets because our state geology has a very high heat flux. It’s in the basin and range. It’s faulted. There is a lot of geothermal here because the crust is relatively shallow,” Perry said.

He explained that the presence of natural heat means that much of the state’s oil “was cooked off millions of years ago to some extent,” and that carbonaceous ore found in the bottom of pits might have been oil at some point.

Economics

The process of extracting the oil that does exist in Nevada is difficult and expensive, said Greg Deimel, public affairs officer for the BLM Elko District office.

Most of the operations are concentrated in areas that have infrastructure already in place, such as Pine Valley in Eureka County and Railroad Valley in Nye County. Oil is sent to Nevada’s one refinery, in Nye County, where it is made into asphalt tiles for roofs, asphalt for roads and some diesel.

“Other targets that are more distant from [infrastructure] will require a much higher oil price to get companies interested in exploring,” Perry said.

The same economic principles applied to one of Nevada’s earliest oil production experiments.

Before the invention of hydraulic fracturing, geologist Robert Catlin operated Catlin Shale Products Co. starting in 1917, producing oil from shale near Elko and investing more than $1 million. Catlin used a heating process called retorting to extract oil — mostly gasoline and various lubricants — from the rock, producing about 15,000 gallons by 1919, according to Elko Daily Free Press archives. In Elko, a barrel of Catlin Hi-Powered oil cost $5 per gallon, which is the equivalent of about $70 per gallon today. The product was tested in engines, but the oil congealed at cold temperatures.

The plant shut down in 1924 because production costs totaled more than sales. Today, all that remains of the site are graffiti-ridden ruins of the former refractory. Papery layers of tan-to-black shale that once lined an ancient lake now protrude from the hill above at angles directed by tectonics.

However, Catlin’s experiment near Elko influenced the development of oil-from-shale technology and sparked an interest in oil production in northeastern Nevada that continues to this day.

“That is what started the whole interest in oil in this area,” Schmidt said.

“I know of no targets for oil in the Rubies. It’s a metamorphic ore complex. There’s no sedimentary rock that would contain oil.” — Rich Perry, administrator, Nevada Division of Minerals

“Nevada doesn’t have a lot of oil targets because our state geology has a very high heat flux. It’s in the basin and range. It’s faulted. There is a lot of geothermal here because the crust is relatively shallow.” — Rich Perry, administrator, Nevada Division of Minerals

“Nevada doesn’t have a lot of oil targets because our state geology has a very high heat flux. It’s in the basin and range. It’s faulted. There is a lot of geothermal here because the crust is relatively shallow.”

— Rich Perry, administrator, Nevada Division of Minerals

“I know of no targets for oil in the Rubies. It’s a metamorphic ore complex. There’s no sedimentary rock that would contain oil.”